Thursday, January 10, 2013

Back in Gardner Denver, Inc.

I’m back in Gardner
Denver, Inc. (Ticker: GDI) today at ~ $69.00. Bloomberg has reported that several private
equity firms: KKR & Co., Advent International and Onex Corp. + TPG Capital
are interested in the company. I was waiting for this type of chatter before getting back into this company. It looks like there is a high probability of a
deal considering what the company has gone through. It looks like the mid 70’s
is the magic number to get a done deal. As I always say, we’ll see…

Edit: I sold my position at $69.10 for a tiny profit this morning (01/11/13) to reduce my risk profile a bit. I still have a good position in Nexen, Inc. (Ticker: NXY) and really need that one to close before I take on new positions.

20 Comments:

In terms of risk reward, I really like Nexen here. I've been adding to my position with the recent dip in price. This deal will close, just a question of when. I see a good chance of this deal getting done in February.

TRLG is a bit harder to evaluate. There have been reports that the PE firms were losing interest. The last I heard was that Sycamore Partners was interested, but that was awhile back. It's been very quiet with TRLG. The market is pricing in a low probability of a deal and I tend to agree.

I suppose you have read Elan (ELN) has been approached by Royalty Pharma with an offer of a 4% premium over 2-22-13 closing price. Given you work in this industry what is your take on this news? If you need more details please let me know.

I find it strange that Royalty Pharma would go after Élan. Royalty Pharma is not into R&D and if you look at Elan's remaining assets after selling Tysabri back to Biogen, there's not much there. They just have a couple of early phase trials. I don't see Royalty Pharma pulling this off.

Well Royalty Pharm's premium offer was a joke. They are a private company so it is challenging to learn about their financial capabilities. If there interest is not serious, what do we think their intentions are here? No doubt they like Elan's recent cash windfall.

We have a new candidate exploring strategic alternatives, Optimer Pharmaceuticals (OPTR), another company within your industry. Add OPTR to your future list. What do you know about OPTR and any potential suitors? They have no debt and $2.06 a share in cash. Closed yesterday at $10.72 and reached an intra day high of $12.74 (+18.84%).

Optimer Pharma is actually kind of interesting. It's not one of the companies I follow, but they do have a niche product (Dificid) used to treat Clostridium difficile. Cases of Clostridium difficile require hospitalization is ~ 300,000+ cases per year in the US. The company is charging ~ $2,800 per treatment so they can really make some $$$ even if they capture just a tiny share of this market. Of course they are competing against much much cheaper less effective drugs such as Vancomycin. They really need a big pharma to take over this product and to market / sell effectively to the hospitals. I'll place my odds on a big pharma taking this company out. At what price????

Thanks for your insights on OPTR. I have not read anything on a possible price yet. It may be a little early in the process. If you know what EBITDA multiples previous drug company acquisitions have gone out at let me know. I have an old spreadsheet model I can plug in some numbers to determine a guestimate.

Here is some background which I have uncovered.

OPTR stock has high short interest and based on volume on trading Wednesday I suspect some of the shorts may have covered. The stock price trend has changed so they will be looking to exit as more news leaks come out. The short squeeze break even price is right around $12.12.

The CEO recently resigned and was replaced by the CFO who is initiating the strategic review process.

According to SEC filings under OPTR there is good recent institutional sponsorship. One large holder Sectoral Asset Management holds many Pharma comp anies. I would not be surprised if they approached OPTR and suggested to put them selves up for sale. The CEO may have resisted and thus was forced to resign.

I saw the CEO of ARIA Pharma on TV yesterday. An important point he mentioned is that companies are run and managed either for the long term growth or to be put up for sale. There are more Pharma acquisitions and mergers than in any other industry. Its time for OPTR to be sold.

Sorry to add all of these non GDI posts here. If you wish me to add somewhere else please let me know.

We have a new candidate exploring strategic alternatives, Nordion (NDZ), another company within your industry. Add NDZ to your future list. What do you know about NDZ and any potential suitors? They have a $7 stock $22m in debt and $1.77 a share in cash ($109m). They report earnings on March 5, 2013.

NDZ, not one I follow closely, but the radioisotope is a tough business to be in. I really can't see a company jumping to get into that biz. But there is definitely value in the company. I'll need to dig a little deeper.

Just a followup to my 03-01-13 post here about NDZ (Nordian). I found out that the actual announcement date about the strategic areview originated on 01-28-13 and an analyst had some interesting points to make on 02-14-13. The Price to Free Cash Flow ratio is 11.49. I listened to the earnings call on 03-05-13 and the CEO repeated his comments that the company is still in the early stages of the process. That line on ly works for so long. I bet he is trying to keep the stock price from elevating. I also looked at the big holders here starting with Scopia Capital Management LLC. I asked myself why would this holders buy up millions of shares and risk them if they did not think something was going to happen in the near future. I have a good feeling about the potential here. I have provided a three web links for easy reference.

Regarding NDZ, it's hard to see private equity getting interested in this one. There are just a handful of companies that are in the medical isotope biz. If it gets taken out, I'll probably be from a strategic acquirer.

I agree PE's would not be interested in NDZ. Historically they pay less than strategics would. In the Bloomberg video Shainker mentioned NDZ having a humanitarian exemption for the liver drug business. He mentioned Covidian could be a buyer for all three businesses. GE could be a buyer for the sterilization business. Any pharma's could be buyers for the Therosphere business.

This is a speculation play. I took a small position and will hold and see what develops.

I can see Covidian taking a look at NDZ. Covidian is also a player in the medical isotope biz so there will be some good synergies. It's hard to see NDZ selling itself in pieces.

Humanitarian exemption designation usually means a product that will lose money. Companies are allowed to break even in the best case scenario. They are prohibited from making money on the product. I doubt anyone will be willing to pay anything for a product with a humanitarian exemption. Unless they are willing the spend some serious $ to conduct clinical trials to gain FDA approval.

About Me

I have a passion for the stock market. I primarily focus my research in the life sciences. I have degrees in Bio and Finance (not that it means much since investing is more of an art than a science). My MBTI personality type is ISTJ. I'm a Generation X'er and was born the year of the pig.